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Consumers Buy More, Willing to Pay More, for Milk Labeled rBGH-Free
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A Montana State University study suggests that voluntary and credible GMO-free labeling provides price premiums for milk producers.

Newswise — When dairy companies voluntarily labeled milk as having no added bovine growth hormone, they increased sales and increased the price people were willing to pay for their product, a Montana State University master's study reports.

The work is thought to provide the first estimates of the impact of voluntary labeling related to biotechnology issues on retail purchases of a food using regional and national sales data. The question for ag producers is whether voluntary labeling has particular value when highlighting a comparison to biotech products, says MSU Economist Dave Buschena.

Former MSU student Kristin Kiesel and MSU economists Buschena and Vincent Smith published a study based on Kiesel's master's thesis in the May edition of the "American Journal of Agricultural Economics." Buschena was Kiesel's adviser at MSU. She is now studying for her doctorate at the University of California at Berkeley.

Genetically engineered bovine growth hormone, or rBGH, has been called the first major biotech product for food production approved by the FDA. Critics claimed that injecting dairy cows with the engineered hormone led to a human health hazard due to possible increased antibiotic use in those cows and increased presence of Insulin-Like Growth Factor-1 in the resulting milk, despite the lack of scientific evidence for their claims. Because of the claims, some dairy companies began to voluntarily label their milk as having been produced without rBGH.

"The data I worked on was milk data, but it should apply to any food product and other types of health and environmental related product labels," said Kiesel in a telephone interview from Berkeley.

Kiesel said she was able to use data gathered whenever grocery shoppers had products scanned by a laser-reader at check out. The store gathers information about the purchases based on a product's computer code, which is called its uniform product codes or UPC. Stores frequently make that data available to outside firms. Recently, researchers have also been able to use this data.

"The main interest for me is how customers make decisions and how these decisions are influenced by available information such as the information provided on a product label," said Kiesel.

Buschena emphasized the importance of the study to milk producers and milk processors. "Voluntary labels in this case were effective in increasing prices that consumers are willing to pay in stores."

Kiesel is extending her concept into a doctoral thesis that looks at both labeling of organic products and household demographics of the people who buy those products. Kiesel's new focus includes the new national organic standards and changes in labeling requirements.

"I'm looking at how the new USDA organic labeling seal affects consumer purchases, how much the standardization and government certification is worth to the consumers and how much it costs to put these new regulations and labels in place," Kiesel said. She added that for organic food, it is not clear what kind of information is being valued and best serves consumers interest, whether it is the certified organic label or whether a phrase like "all natural" might work as well.

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